Know The Enemy

Posted by James Randolph onJuly 16, 2012

“Wage Rises in China May Ease Slowdown,” states the headline of a recent article in the Wall Street Journal. The article begins, “Wages are still climbing rapidly in China and many companies are having trouble filling jobs – evidence of a structural shortage in the labor market that may help China adjust to slower growth without political instability.”

If the article were about America, it might have read, “Wages are still stagnant or declining in America and many workers are having trouble finding jobs – evidence of a structural shortage in employment that may cause slower growth and lead to political instability.”

It is no coincidence that the two are mirror images. It is the essential difference between emerging and mature economies. China is still strongly influenced by the Fordist model of growth while the model has reached the stage of relative insignificance in the western world. Falling back on the model, which brought us to where we are today, is a regressive tactic that has no chance of preserving our economic relevance.

Instead we are challenged to define a new model and once again be the pioneers. To prepare ourselves for the economic wars of the 21st century we could learn from Sun Tzu, acknowledged author of “The Art of War,” an ancient Chinese treatise on military strategy.

“So it is said that if you know your enemies and know yourself,” Sun wrote, “you can win a hundred battles without a single loss. If you only know yourself, but not your opponent, you may win or may lose. If you know neither yourself nor your enemy, you will always endanger yourself.”

Sun’s understanding of military strategy applies equally to economic strategy. Victory does not come by following some plan established beforehand but rather by having the agility to rapidly adapt to changing conditions. As on the battlefield, change in the global economy is the norm and not the exception.

Preconceived notions and adherence to obsolete strategies can bring only defeat. For the moment it looks as though we are losing the battle, but that is only because we fail to understand not only ourselves, but the “enemy” as well.

To understand China we need only look at the history of our own emergence and progression through the Fordist cycles. To understand ourselves, however, we must look to the future.

While we may achieve victory in short-term skirmishes by virtue of our relative economic might, defeat will be inevitable if we fail to move beyond strategies that are no longer tenable in our stage of economic evolution.

As Sun Tzu warns, “Anyone who excels in defeating his enemies triumphs before his enemy’s threat become real.”